Pc Connection, Inc. · NASDAQ:CNXN
Pc Connection — Raymond James IT Supply Chain Conference 2003
55 slides from Pc Connection's conference presentation, Dec 10, 2003
Slide 1: Raymond James IT Supply Chain Conference
Exhibit 99.1 RAYMOND JAMES IT SUPPLY CHAIN CONFERENCE December 11, 2003 Patricia Gallup, Chief Executive Officer Mark Gavin, Senior VP of Finance and CFO
Slide 2: Safe Harbor Statement
2003 and the statements administrative costs Such risks and of the Company to hire and SAFE HARBOR STATEMENT This presentation contains forward-looking statements that are subject to risks and uncertainties, including, but not limited to, the impact of changes in market demand and the overall level
Slide 3: PC Connection, Inc. company facts
• Million Million Million Billion • 1982 1,400 NASDAQ PCCC 24.8 7.4 $217 $1.19 $6.30 $4.80 $8.75 INC. Share Share Per Per Value 11/30/03 Value –1000 Outstanding Capitalization : Book Price • CONNECTION, Sales Book • Fortune Founded Employees Exchange Symbol Shares Float Market 2002 Total Tangible Cl
Slide 4: Business Overview
Business Overview Patricia Gallup, Chief Executive Officer
Slide 5: Business Overview
• products information solutions subsidiaries 580 brand-name of and sales with provider products three model relationships 100,000 • OVERVIEW than • response (IT) through representatives vendor more rapid technology Operates Relationship-based A sales Multiple Offering • BUSINESS _ _ _ _
Slide 6: Organizational and business segment structure
• Inc. Medium-to-Large Sales MoreDirect, Organization Support Government & Sales State/Local Education • ¦ • & • Inc. • Inc. Government • STRUCTURE Company) GovConnection, Federal • Connection,Holding Services) • (Parent Services Services Services PC CorporationConnection Service Resources Developme
Slide 7: Recognition & Awards
• Award Year Torch Class the Computer of of list World Boston Management Bureau list Companies” PC Week companies the by Entrepreneur Business Ethics Service Magazine’s of Technology Excellence: Inc. growing Company Group Better Business 100 of Online by Winner National Principle-Centered the Busine
Slide 8: Save 10% PC Connection
— Save 10° PCConnectio r
Slide 9: Building Additional Brands
BUILDING ADDITIONAL BRANDS:
Slide 10: PC Connection Sales Corporation (SMB segment)
• Segment) information catalog solutions (SMB of medium-sized and marketer and telemarketing, marketing Corporation products small- (SMBs) direct on outbound website • Sales • Leading technology Focused businesses Utilize and • PC _ _
Slide 11: Differentiated value to customers
• service 390 superior –million 2003) $703 providing representatives 30, -by customers sales sales to value of September annual of Differentiated and Number (as 2002 • _
Slide 12: GovConnection public sector markets
• into • Sector) separated telemarketing, • Ed • are 12 • – • (Public sectors: K Higher outbound Inc. customers market Local sales, website sector and field and • distinct Federal State • GovConnection, Public four Utilize catalog • _
Slide 13: GovConnection seasonality of business
GovConnection: — = General seasonality of business: Qi @Q2 Q3 Q4 Total Federal 15% 17% 33% 35% 100% Education 19% 29% 31% 21% 100% State and Local 20% 31% 26% 23% 100%
Slide 14: GovConnection sales representatives and 2002 sales
GovConnection: — = Number of sales representatives — 111 (as of September 30, 2003) = 2002 annual sales - $294 million
Slide 15: MoreDirect, Inc.
• account in logistics) procurement sales experience wholesale or field leading hardware years of warehousing 20 no IT –customers high-level manufacturers – • Inc. 10 • efficient large with inventories and for hardware inventory MoreDirect, Provides system Knowledgeable, managers IT Aggregates distr
Slide 16: MoreDirect sales and representatives
• 79 million number customers – $249 -serial into sales 2003) tracking, directly representatives 30, annual asset data systems sales forma of September invoice pro of Provides and back-end Number (as 2002 • _
Slide 17: Offering choice and superior service is our competitive advantage
OFFERING CHOICE AND SUPERIOR SERVICE IS OUR COMPETITIVE ADVANTAGE
Slide 18: Products: your brands
• BRANDS” • Hand Others) • “YOUR On • Data, • Manufacturers Partnerships Inventory Tech 1,400 of (Ingram, Over $50M Distribution • PRODUCTS _ _
Slide 19: Hardware support: your way
• WAY” “YOUR –SUPPORT • Configuration Loading Tagging Management Services Custom Image Asset Rollout Custom • HARDWARE _ _ _ _
Slide 20: Logistics: next day
• DAY” facility a.m. “NEXT Airborne feet 3:00 – on square through Rate 200,000+ Shipping Fill Warehouse 99.5% • LOGISTICS _ _ _
Slide 21: Broad product selection
Slide 22: Multiple vendor relationships
MULTIPLE VENDOR RELATIONSHIPS
Slide 23: Pursuing large market opportunities
Company Market Share 0.88% 0.61% 0.29% 0.58% (2) $703 294 249 $1,246 Pro Forma Net Sales 2002 (1) $80,000 48,000 85,000 $213,000 Market Opportunity PURSUING LARGE MARKET OPPORTUNITIES ($ in millions) and Medium-Sized IDC and PC Connection estimates The pro forma net sales assumes the acquisition of
Slide 24: Strategies for Growth
Strategies for Growth Patricia Gallup, Chief Executive Officer
Slide 25: Growth strategies overview
• Technology and OVERVIEW Representatives Server Sales Internet of Margins of Enterprise STRATEGIES Productivity Number Power on Opportunities Sales the Product the Focus Improve Increase Improve Leverage Heighten Networking • GROWTH _ _ _ _
Slide 26: Growth strategies overview (continued)
• Alliances OVERVIEW Offerings and Service High-Growth Acquisitions STRATEGIES and onSegments Product Focus Strategic Expand SharpenCustomer Pursue • GROWTH _ _
Slide 27: Improve sales productivity
Target $3,000 3,500 4,000 $3,200 (1) $2,063 2,969 3,452 $2,434 Average Productivity Annual 2002 Sales Reps Annual 341 99 72 512 (1) 703,505 293,938 248,564 Net Sales 2002 $1,246,007 Pro Forma $ IMPROVE SALES PRODUCTIVITY and Medium-Sized Total/Average The pro forma information assumes the acquisitio
Slide 28: Improve training in key areas
IMPROVE TRAINING IN KEY AREAS
Slide 29: Concentration areas for training
• desk vendors FOR employee’s key areas with the key at training in training training partnerships • CONCENTRATION skills • PROGRAMS Manager Certifications sales training OF interactive Continuing Account Technical Online Ongoing • AREAS TRAINING _ _ _ _
Slide 30: Increase the number of sales representatives
Q3 03 390 111 79 580 Q2 03 355 114 77 546 Q1 03 330 101 74 505 Q4 02 341 99 72 512 INCREASE THE NUMBER OF SALES REPRESENTATIVES SMB Public Sector Large Account Total
Slide 31: Account manager tenure
Sep- 03 Jun- 03 Mar- 03 Dec- 02 Sep- 02 Public Sector Account Managers Jun- 02 Mar- 02 Dec- 01 Sep- 01 SMB Account Managers Jun- 01 Mar- 01 ACCOUNT MANAGER TENURE (In Months) 45 40 35 30 25 20 15 10 Months # of
Slide 32: Improve margins through product focus
• as Connection offerings accessories products PC for with service MARGINS sales sales enterprise-class sales penetration add-on net value-added solution PRODUCT of of total on consumables sales of account third-party focus percent Enhancement and Increase a Increase and Greater • IMPROVE _ _ _
Slide 33: Internet business accounts
• (IBAs) Control Costs Pricing Customer Productivity Purchasing Systems Rate with Transaction Sales Purchasing Return Discounting 7 x Centralized Procurement ACCOUNTS 24 Account-Specific Integration Reduced Increased Lower Less • ? ? ? ? ? ? • BUSINESS INTERNET
Slide 34: Internet business account program
Q3 03 Q2 03 Q1 03 % of Public Sector Sales Q4 02 New Web Site Rolled Out Q3 02 % of SMB Sales Q2 02 Q1 02 INTERNET BUSINESS ACCOUNT PROGRAM (Excluding MoreDirect) 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0%
Slide 35: Heighten focus on enterprise networking
• Cycle Enterprise to ENTERPRISE Sales Certifications Desktop ON Solution Services from Staff Center FOCUS Lifecycle Briefing Shifting Enterprise Technical IT Mix on Customer NETWORKING Focus Increase Complete Product • HEIGHTEN _ _ _ _ &
Slide 36: Enterprise solution sales cycle
Account Profiling Assessment Solution Design Demand Generation Services ENTERPRISE SOLUTION SALES CYCLE Support & Maintenance Proposal Delivery
Slide 37: Technical staff certifications
• training Clustering • & TCP certification & Linux+ NTP in Availability CERTIFICATIONS man-hours High Connectivity, 2003) Server+, Architect, Unix (May CCSE Network+, Technology 1,950 for MCPS CNA & NBX Core STAFF SAN Network Availability Protection & CCDA & Core, & ASE CSA CCSA CSE PSE invested NC
Slide 38: Complete IT lifecycle services
• services Analysis business and Installation Support Owned Programs Migration • & (wiring) vs. solve Security LAN Architecture Consulting Management Compliance Management & SERVICES products Design Assessment Augmentation Plant License Deployed Licensing SAN Network Wireless IT LAN/WAN Storage Staf
Slide 39: Customer briefing center
• PCC Reps Visits by Speaker Experiences Paid Keynote Vendor Engineer and CENTER Customer Expenses as PCC for—Exec Demonstrations Vendor with • Events HQ • Used to Vendor Solution and PCC Sessions and for BRIEFING Customer Analyst from Planning • Environment PCC Studies • of Customers/Prospects Envi
Slide 40: Product mix shifting from desktop to enterprise
Enterprise/Networking 2002 Notebook & Desktop Systems 27% 31% 42% Other Enterprise/Networking Notebook & Desktop Systems 5% 1996 24% PRODUCT MIX SHIFTING FROM DESKTOP TO ENTERPRISE 71% Other
Slide 41: Pursue strategic acquisitions
Acquire New Customers Strengthen Product Offerings Add Management Talent Immediately Accretive to Earnings and Operating Metrics Culture & Fit are Crucial Consolidating Industry Creates Opportunities Strategy Built on Experience & Discipline ? ? ? ? ? PURSUE STRATEGIC ACQUISITIONS ¦ ¦
Slide 42: Financial Summary
Financial Summary Mark A. Gavin, Sr. VP of Finance and CFO
Slide 43: Net sales by segment
Large Account Public Sector SMB 2003 Q3 2002 2003 Q2 2002 2003 Q1 2002 NET SALES BY SEGMENT ($ in thousands) $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $0
Slide 44: Q4 2003 sales trends
November 16.5% 8.9% 17.4% 12.6% (11.8)% 8.7% 2003 % Change Over Prior Year Month October 23.4% 28.4% 28.1% 28.3% 0.2% 19.5% Total Q4 2003 SALES TRENDS SMB Public Sector: Federal Sled Large Account Consolidated
Slide 45: Annualized sales productivity
2002 2003 563 ANNUALIZED 544 3rd Qtr 526 532 2nd Qtr 509 1st Qtr 514 SALES PRODUCTIVITY – ($ in thousands) $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 White boxes represent average reps
Slide 46: Active customers
Q3 Q2 2003 Q1 Q4 Q3 2002 Q2 Q1 ACTIVE CUSTOMERS 490,000 480,000 470,000 460,000 450,000 440,000 430,000 420,000
Slide 47: Number of orders
NUMBER OF ORDERS
Slide 48: Q3 product mix
% Change 26.5% 7.5% (1.6)% (30.4)% 6.3% 5.9% 11.3% 9.2% (9.7)% 2.5% 2002 % of Net Sales 16.9% 13.6% 9.3% 15.8% 7.7% 11.0% 10.8% 5.3% 9.6% 100.0% 2003 vs. 2002 2003 % of Net Sales 20.9% 14.2% 8.9% 10.7% 8.0% 11.4% 11.7% 5.7% 8.5% 100.0% Q3 PRODUCT MIX – Notebooks & PDAs Desktops/Servers Storage Devic
Slide 49: Gross margins as a % of sales
Q2 2003 10.74% 7.89% 11.68% 10.25% Q3 2003 11.24% 7.96% 11.31% 10.28% GROSS MARGINS AS A % OF SALES SMB Public Sector Large Account Consolidated
Slide 50: S,G&A as a % of net sales
2002 2003 Q3 Q2 Q1 S,G&A AS A % OF NET SALES 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% Excludes special charges
Slide 51: Operating margins as a % of net sales
2002 2003 Q3 Q2 Q1 OPERATING MARGINS AS A % OF NET SALES 1.50% 1.00% 0.50% 0.00% -0.50% -1.00% -1.50%
Slide 52: Diluted earnings per share
2002 2003 Q3 Q2 Q1 DILUTED EARNINGS PER SHARE $0.10 $0.08 $0.06 $0.04 $0.02 $0.00 -$0.02 -$0.04 -$0.06 -$0.08 -$0.10
Slide 53: Asset utilization: DSO and inventory turns
Q3 2002 50 24 Q3 2003 48 19 ASSET UTILIZATION DSO Inventory Turns
Slide 54: Financial model and target ranges
11.5% 9.0% 2.5% 28X 43 Days TARGET RANGES 15% + 30% + 8.5%—2.0%—25 –TWO-YEAR 11.0 – 40 –.5% 2002—(57.0)% 10.8% 10.2% 22X 49 2001 (18.0)% (75.0)% 11.1% 9.9% 1.0% 18X 53 2000 33.0% 30.0% 12.2% 8.6% 3.6% 18X 50 1999 44.0% 44.0% 12.0% 8.5% 3.5% 14X 58 1998 33.0% 29.0% 12.4% 9.1% 3.0% 10X 53 FINANCIAL MO
Slide 55: Complete IT Solutions for Business
Complete IT Solutions for Business
PC Connection — Raymond James IT Supply Chain Conference 2003 on 6ix